Monday, December 28, 2015

"An Unkind Day For Crude" (and Credit Suisse says maybe the $20's)

Yesterday's move on the API report, combined with today's on the EIA
numbers is noteworthy because it wasn't just short covering, there are
quite a few folks who want to own oil.
We don't but we also don't fight the crowd. Instead we'll be looking for a reversal next week....

Oil went on to settle at $38.10 on Thursday before the long weekend.
Currently $36.79 down $1.31 and looking heavy, only 13 cents above the daily low.
A twofer from Barron's, first up, Focus on Funds

The post-holiday trading session is not being kind to crude, with oil
prices giving back a big chunk of last week’s gains early on Monday.

West Texas Intermediate crude oil prices slipped 3.5% to $36.74 a barrel in recent trading, while the U.S. Oil Fund (USO) dropped 3.3%.

Oil prices surged from recent lows last week, but can’t seem to
muster a continuation of the rally. Supply and demand imbalances mean a fundamentally uncertain environment. OPEC
is showing no signs of backing down from its production targets, and,
increasingly, the markets are mulling how to deal with more supply from a
new player — Iran.

Normally we would not try to frame
oil-market risk in any two week period, but this stretch through the
beginning of January is special because technical analysts explain that
West Texas Intermediate and Brent futures are trading perilously close
to critically important support levels.

Critically
important, because if Brent were to fall through $34.55 or West Texas
Intermediate (WTI), to below $32.40, there would be little in the way of
crude-oil benchmark prices falling into the $20s per barrel.

That
is not great, the more so since in this year-end low-volume trading
stretch crude-oil markets can be pushed around with less effort.